When Telecom Plus (LSE: TEP) floated on the UK stock market in summer 2000, it was seen by many as one of the best stocks to buy for long-term growth. And it certainly fulfilled that promise.
Since launch day, Telecom Plus has soared 380%. It’s outstripped the FTSE 250 so far this century, even though the mid-cap index hasn’t done so badly itself. And in that time, it’s turned into a bit of a dividend monster too — with a healthy 6.9% yield forecast for the current year.
Not a bed of roses
The past few years, however, haven’t been all sunshine. The share price has plunged 60% since the peak it hit at the end of 2022. Early investors who managed to sell back then could have tucked away a 12-bagger since flotation day.
But the share price fall is part of the reason for today’s fat dividend yield. So, is the decline just a result of a growth stock passing its peak as it enters maturity? Or has something actually gone wrong? And does this look like one of today’s best stocks to buy?
We’ve had one, hopefully short-term, disappointment ahead of full-year results…
Adjusted pre-tax profits for FY26 are expected to be at the bottom end of our previously guided range of £132m-£138m, following reduced energy consumption during an unseasonably warm winter.
— Year End Trading Update, 28 April 2026
What does it do?
Under the Utility Warehouse brand, Telecom Plus combines energy, telecommunications and insurance offerings all in one. It doesn’t spend loads on fancy advertising, relying mainly on word of mouth. And it’s built up an impressively loyal customer base. Customer retention and operational costs are among the best in the business.
That business model, though, faces pressure at times of high energy prices and lower demand. And as a smaller company with a market cap of around £800m, we might not see the same resilience as bigger FTSE 100 competitors. That could be a worry.
It also disturbs me a little to see debt building up on the balance sheet. Analysts expect net debt to reach £148m this year — up 28% in a year, and more than twice where it was in 2022. I’m always nervous when I see dividends and debt growing hand in hand.
So what should investors do?
Is the current pessimism overdone? Looking at forecasts and valuation, I think so. Here’s how things look…
- Forecast price-to-earnings (P/E) ratio of 9.0, and falling.
- Forecast dividend yield of 6.9%, and rising.
- Strong Buy consensus with average price target of 2,050p.
That average target is around twice the current price. And even the most pessimistic broker of the five I can find offering recommendations sees a 28% gain on the cards.
So, tough times for the energy business — but upbeat forecasts. Is this a stock that both dividend and growth investors should consider? I think so. But I’m waiting to see full-year results due on 23 June.
Should you invest £5,000 in Telecom Plus Plc right now?
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Alan Oscroft does not hold any positions in the companies mentioned.
